Commercial Real Estate Blog

When trying to finance a real estate project, it’s common for a borrower to approach multiple lenders for a loan. Unfortunately, it’s equally as common for those same lenders to provide inconsistent responses. One lender may look at a deal and want nothing to do with it while another may look at the same deal and be quick to approve it. Why? The answer to this question rests within a lengthy and …

[Read more...] about Understanding a Lender’s Credit Policy Requirements

Loss to lease is a commonly used calculation in a commercial real estate analysis. However, loss to lease can also be one of the most confusing calculations to understand, especially when you see it for the first time. In this article we’ll take a closer look at the loss to lease calculations and walk through several examples to help you understand what it is and how it works. Loss to Lease …

[Read more...] about How The Loss to Lease Calculation Works

Depending on the complexity of a real estate project, financing can come from many different sources. Collectively, the sources are often referred to as the “capital stack” where “stack” is an appropriate metaphor because each source comes with its own collateral, return expectations, and repayment priority. While there are many shades and variations of each, the Capital Stack typically consists …

[Read more...] about The Capital Stack Explained

Unless you run a large company with an established track record of repaying loans, a bank will likely ask for a personal guarantee before approving a commercial real estate loan.  What is a personal guarantee?  In this article we’ll thoroughly explain personal guarantees by covering the following: Definition of a personal guarantee When personal guarantees are used Personal guarantee types …

[Read more...] about Understanding Personal Guarantee Structures

In a former life, I helped banks install loan servicing software. In every installation, there came a point where the bank would have to decide which accrual method to use for its loan portfolio.  When we got to this point, the Loan Operations manager would always turn to me and say, “what’s the difference between 30/360, Actual/360, and Actual/365, and which one should we go with?” Although …

[Read more...] about 30/360 vs Actual/360 vs Actual/365: Loan Accrual Calculations Explained

The term sheet is an important document in commercial real estate lending. It is used to outline the terms of a potential loan prior to fully underwriting the deal and issuing a commitment letter. In this article, we will take a closer look at how terms sheets work for commercial real estate loans. To provide an introduction to the Term Sheet and its importance in the lending transaction, I’m …

[Read more...] about How Term Sheets Work For Commercial Real Estate Loans

As sure as the sun rises, interest rates are going to go up and down over time.  As they change, they have a profound effect on global financial markets, investors, banks, and corporate borrowers. In the world of lending, both borrowers and debt issuers (lenders) have the ability to capitalize on interest rate movements by entering into derivative contracts called an Interest Rate Swaps.  By …

[Read more...] about Introduction to Interest Rate Swaps